STATEMENT ON PRINCIPAL ADVERSE IMPACTS OF INVESTMENTDECISIONS ON SUSTAINABILITY FACTORS
Product name: SANKEI REAL ESTATE Inc.
The following is the adverse sustainability impact statement of SANKEI REAL ESTATE Inc. (“SRE”)
pursuant to Regulation (EU) 2019/2088 (“SFDR”). SRE has no employees in accordance with theprohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japanand rely on Sankei Building Asset Management Co., Ltd. (the “Asset Manager”), to manage and operate
the properties in our portfolio. SRE and the Asset Manager are hereinafter referred to collectively as “we”,“us” or “our”.
Please note that SFDR requirements, including the scope of their application to issuers outside the European
Economic Area, continue to evolve. We are therefore taking a principles-based approach to compliance with
the SFDR disclosure standards, which are subject to change.
1. Summary
We consider principal adverse impacts of our investment decisions on sustainability factors. The present
statement is our consolidated statement of the principal adverse impacts on sustainability factors (“PAI”).
The statement covers the reference period from January 1, 2023 to December 31, 2023. The statement will
be reviewed at least once a year.
We believe that our sustainability initiatives are essential for our sustainable growth. We improve mid- andlong-term returns of investors and contribute to the realization of sustainable society and urban developmentby implementing initiatives that address ongoing social and lifestyle changes. Under our sustainability
policies, we, in collaboration with the Asset Manager, take actions on climate change, including energy
saving efforts and reduction of GHG emissions, introduction of renewable energy, and preservation of thewater environment.
We use the definition of PAI as described in Recital 20 of SFDR being “those impacts of investment
decisions and advice that result in negative effects on sustainability factors”, with sustainability factors
referring to environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐
bribery matters as defined in article 2 (24) of SFDR.
We believe that investment decisions that negatively affect climate or other environment-related resources,or have negative implications for society, can have a significant impact to risk and value creation for ourunitholders. To this end, we consider PAI of our investment decisions throughout all major steps of theinvestment decision and property management process throughout the lifecycle of the properties in ourportfolio.
2. Description of principal adverse sustainability impacts
Nearly all types of economic activity have the potential to impact various PAI indicators, both positivelyand adversely. We aim to manage the risk connected to PAI from our investment decisions in several ways,
including general screening criteria, due diligence and our ESG initiatives. Some of the PAI indicators listed
below are currently already being monitored and reported. As the availability of data improves, we aim toadd more indicators.
Table 1
Principal adverse sustainability impacts statement
SRE does not invest in investee companies, but invest in real estate. As adverse sustainability indicators 116 as contained in the Regulatory Technical Standard pertain to investee companies, these are notincluded in this PAI statement, which pertains to real estate investments.

Indicators applicable to investments in real estate assets
Adverse sustainability
indicator
Fossilfuels

17.
Exposure
to fossil
fuels
through
real estate
assetsEnergyefficiency

18.
Exposure
to energyinefficient
real estate
assetsMetricShare ofinvestments
in real estate
assetsinvolved intheextraction,
storage,transport ormanufactureof fossil
fuels
Share ofinvestments
in energyinefficient
real estate
assets

Impact in 2023

Impact in 2022

N/A

N/A

We do not invest
in real estate
assets involvedin the extraction,
storage, transport
or manufactureof fossil fuels.

N/A

As of December
31, 2023, 50.7%
of our properties
were not “GreenBuildings” (asdefined to theright) based on the
total floor area(calculated inproportion to coowners’ shares).

As of December
31, 2022, 65.4%
of our properties
were not “GreenBuildings” (asdefined to theright) based on the
total floor area(calculated inproportion to coowners’ shares).

To track theenvironmental
performance ofour properties,
we rely on
certifications
issued by thirdparty
organizations,such as theDevelopment
Bank of Japan(“DBJ”)’s Green
Building
certification,
Building
Energyefficiency
Labeling System
certification(“BELS”),
Comprehensive
Assessment
System for Built
Environment
Efficiency(“CASBEE”)
certification, andother equivalentcertifications.
We call ourproperties thatreceive any suchcertifications“GreenBuildings”.

We implement
as appropriate
measures toreduce theirenvironmental
impactfollowingacquisition,
including by
obtaining suchas DBJ’s
Green
Building
certification,
BELS,CASBEE,LEED orWELL.

Explanation

With respect to
CASBEE, weconsider aproperty to havesufficientenvironmental
certification if it
received B+Rank or higher
out of theCASBEE

Actions taken

ranking system
featuring Rank S(excellent), Rank
A (very good),
Rank B+ (good),
Rank B- (slightlyinferior) andRank C(inferior).

Table 2
Additional climate and other environment-related indicators
SRE does not invest in investee companies, but invests in real estate. As additional climate and otherenvironment-related indicators 1-17 as contained in Table 2 of Annex 1 of the draft Delegated Regulation
pertain to investee companies, these are not included in this PAI statement, which pertains to real estate
investments.
Adversesustainability
impactAdverse sustainability impact (qualitative or quantitative)

MetricIndicators applicable to investments in real estate assets
Greenhouse gasemissions

18. GHG emissions

GHGemissions(Unit)
Scope 1(t-CO2)
Scope 2(t-CO2)
Scope 3(t-CO2)
Total(t-CO2)

Energyconsumption

Scope 1 GHG
emissions generated byreal estate assets
FY2023

FY2022

FY2021

669.10570.56530.64

2,371.91

3,053.32

2,567.75

5,084.17

5,466.45

4,301.23

8,125.18

9,090.32

7,399.62

We aim to reduce GHG emissions by 5% from 2021 to 2025 with 2019 as
the base year in Scope 1 and Scope 2 and by 1% from 2021 to 2025 with2019 as the base year in Scope 3 for intensities of energy-originated GHGemissions.
19. Energy consumption intensity
Energy use intensity

Unit: kWh/m2

FY2023

FY2022

FY2021243.09270.24294.45

We aim to reduce energy consumption as below: 1% from 2021 to 2025with 2019 as the base year, for intensities of energy consumption.
(i) 5% reduction in energy consumption between 2021 and 2025 with2019 as the base year in areas within our portfolio where the AssetManagers can manage energy consumption(ii) 1% reduction in energy consumption between 2021 and 2025 with2019 as the base year in areas used by tenants where the Asset Managers
cannot manage energy consumption.

Scope 2 GHG
emissions generated byreal estate assets
Scope 3 GHG
emissions generated byreal estate assets
Total GHG emissions
generated by real estate
assetsEnergy consumption in
kWh of owned realestate assets per squaremeterAs of December 31, 2023, we have installed the following equipment insome of our properties: LED lighting; light control systems with daylightsensors; and low emissivity glass coated with special metal films, whichreflects sunlight in the summer to reduce the heat effect and absorbs heatin the winter for improved heating efficiency.
Waste

20. Waste production in operations
Although we separate waste at all of our properties, none of our properties
are equipped with facilities for waste sorting or covered by a waste
recovery or recycling contract.

Share of real estate
assets not equippedwith facilities for wastesorting and not coveredby a waste recovery or
recycling contract

Table 3
Additional indicators for social and employee, respect for human rights, anti-corruption and anti-bribery
matters
SRE has no employees in accordance with the prohibition on having employees under the Act on
Investment Trusts and Investment Corporations of Japan, and relies on the Asset Manager to manage andoperate the properties in our portfolio. Accordingly, additional indicators for social and employee, respectfor human rights, anti-corruption and anti-bribery matters in this PAI statement pertain to the AssetManager and the tenants of the properties in our portfolio, to the extent available.
SOCIAL AND EMPLOYEE, RESPECT FOR HUMAN RIGHTS, ANTI-CORRUPTION AND ANTI-BRIBERYMATTERS
Adversesustainability
impactAdverse sustainability impact (qualitative or quantitative)

MetricIndicators applicable to investments to the Asset Manager or tenantsSocial andemployee matters

4. Lack of a supplier code of conduct
We execute lease agreements with tenants pursuant to which (i) they
confirm that they do not fall into any category of anti-social forces orgroups which conduct dangerous or unlawful acts, and (ii) they agree
not to sub-lease properties to those who fall into any such category.

Share of investments ininvestee companies without
any supplier code ofconduct (against unsafe
working conditions,precarious work, childlabor and forced labor)
As of December 31, 2023,
none of our tenants are
anti-social forces or groups.

5. Lack of grievance/complaints handling mechanism related to
employee matters
We have established a grievance/complaints handling mechanism forour employees, which give them access to our human resource
division and give feedback to harassment surveys conducted by athird-party service provider. Our human resource divisioninterviewed all of our employees during the period from August to
September, 2023 and we conducted an annual harassment survey.

6. Insufficient whistleblower protection

Share of investments ininvestee companies without
any grievance/complaints
handling mechanism
related to employee matters
The Asset Manager has agrievance/complaints
handling mechanism for allof its officers andemployees.
Share of investments inentities without policies on

Anti-corruption
and anti-bribery

We have a whistleblower protection system that our employees may
use to report a compliance violation to by phone, email, web site
access and sealed letter. An outside consulting firm receives thereport, and the compliance division of the Sankei Building Groupinitiates investigation and implements appropriate measures. All of
our employees are informed of this system through our internal
portal.

the protection ofwhistleblowers

16. Cases of insufficient action taken to address breaches ofstandards of anti-corruption and anti- bribery

Share of investments ininvestee companies withidentified insufficiencies inactions taken to address
breaches in procedures andstandards of anticorruption and anti-bribery

We specify rules of anti-corruption and anti-bribery including
punishment against breaches of rules in work regulations andmanage such rules. Under the rules, our employees are prohibitedfrom (i) utilizing our assets without our approval, (ii) receiving any
personal profit for our business without our approval or (iii)
obtaining any personal profit through private transactions by abusing
their employee status. If an employee violates these rules, we maydiscipline the employee.

17. Number of convictions and amount of fines for violation of anticorruption and anti-bribery laws
We have established Compliance Regulations, a Compliance
Manual, Labor Regulations and Reward and Punishment Regulations
and follow the Compliance Handbook established by Sankei group.
We use these to monitor compliance with anti-corruption and antibribery laws to prevent breaches of such anti-corruption and antibribery laws. We also conduct an annual internal audit to confirm if
there is any breach of the rules. In addition, we have the right toterminate our lease agreement with a tenant in a case where thetenant commits any crime, including any violation of anti-corruption
and anti-bribery laws.

All of the Asset Manager’s
officers and employees areprovided whistleblower
protection.

During January 1, 2023 to
December 31, 2023, there
was no case of insufficientaction taken to address
breaches of rules of anticorruption and anti-bribery.
Numbers of convictions
and amount of fines forviolations of anticorruption and anti-bribery
laws by investee companies
During January 1, 2023 toDecember 31, 20223, there
was no conviction orviolation of anti-corruption
and anti-bribery law
committed within the AssetManager or by our tenants.

For descriptions of actions which SRE takes and will take with respect to the PAI indicators, please refer tothe sustainability page on SRE’s website: https://www.s-reit.co.jp/en/sustainability/
3. Description of policies to identify and prioritize principal adverse sustainability impacts
Subject to data availability, we monitor the selected PAI indicators for the existing properties in our portfolio.
Prior to our investment in a property, we conduct due diligence review of the property, including not only
profitability, but also environmental features, which includes selected PAI indicators. The due diligence
findings related to selected PAI indicators are reported and reviewed prior to the investment decision.
The Asset Manager established the Energy Conservation Policy and the GHG Emission Reduction Policy inMarch 2021. Based on such policies, we continually track energy and GHG emission at our properties, andthe Asset Manager’s Sustainability Promotion Committee uses the data to assess progress made againsttargets for energy consumption and GHG emission. If we fail to achieve any target, the Asset Manager
investigates the cause and considers necessary action plans.
For further information, please refer to our ESG website: https://www.s-reit.co.jp/en/sustainability/

4. Engagement policies
Due diligence and screening
Prior to our investment in a property, the Asset Manager conducts due diligence review of the property,
including environment assessment and evaluation of risks related to building safety, natural disasters, futureprospects, and location. As a result of due diligence review, if there is a risk of a negative environmental
impact, such as due to soil contaminants or other harmful substances or noncompliance with law aimed at
reducing energy consumption or greenhouse gas emissions, we will take measures to avoid or mitigate therisk by ceasing the acquisition of the property or requiring the seller to undertake improvement.
To ensure the efficacy of its sustainability initiatives, the Asset Manager has established a Sustainability
Promotion Committee, which generally meets every quarter, to consider and propose objectives, policies
and measures related to sustainability. The decisions made at the Sustainability Promotion Committee arereflected in SRE’s investment guidelines as appropriate and we follow the policies and consider the factorsthat the Sustainability Promotion Committee agreed upon in making our investment decisions asappropriate. The Sustainability Promotion Committee consists of the Asset Manager’s Vice President, whoserves as the Sustainability Chief Executive Officer, the Asset Manager’s President, the General Managerof the Asset Manager’s Sustainability Promotion Office, who serves as the Sustainability ExecutiveOfficer, and the general manager of each department excluding the Fund Management Department (whichis in charge of private funds) and the internal audit office. The chair of the Sustainability Promotion
Committee is the Sustainability Chief Executive Officer, who is authorized to adopt objectives, policies
and measures proposed by the Sustainability Promotion Committee.
At the properties we operate, we set numerical targets for our entire facilities and monitor the amount ofenergy consumption, water consumption as well as the amount of GHG emissions of common areas of ourproperties in order to reduce our environmental burden. Based on this, we have selected PAI indicators GHG
emissions, energy consumption intensity and waste production in operations as our PAI indicators in Table
2 above.
Because any transaction with an anti-social force or other group that commits dangerous or unlawful acts
carries significant risks to us, including that it could prevent our lawful transactions with stakeholders, wehave selected lack of a supplier code of conduct as our PAI indicator in Table 3 above. We have selectedlack of grievance/complaints handling mechanism related to employee matters, and insufficientwhistleblower protection as our PAI indicators in Table 3 above because prompt identification andprevention of breach of applicable laws, regulations and internal rules are important. We have selected casesof insufficient action taken to address breaches of standards of anti-corruption and anti- bribery and numberof convictions and amount of fines for violation of anti-corruption and anti-bribery laws as our PAI indicators
in Table 3 above, which are consistent with our brief that any criminal act by our employee or tenant woulddestroy our stakeholders’ trust in us.
Engagement
The Asset Manager established the Procurement Policy in March 2021 for selecting and evaluating products
and services we purchase and their suppliers. When we select a supplier, we review its sustainability efforts
and cooperation in implementing our Sustainability Policy. We conduct an annual review to monitor its
performance in such a way as either of questionnaire survey, training or check at our regular meetings.
5. References to international standards
We follow the United Nations’ 17 Sustainability Development Goals, a reference framework adopted at theUnited Nations Summit held in September 2015. We also respect the Universal Declaration of Human Rights
in the International Bill of Human Rights, international labor standards such as the ILO Declaration onFundamental Principles and Rights at Work, and the UN Guiding Principles on Business and Human Rights.